Breaking the Trend: How to Avoid Cherry-Picked Signals

Breaking the Trend: How to Avoid Cherry-Picked Signals | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Breaking the Trend: How to Avoid Cherry-Picked Signals Sébastien Valeyre This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8020635/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Our empirical results show an impressive fit with the pretty complex theoretical Sharpe formula of a Trend following strategy depending on the parameter of the signal, which was derived by Grebenkov and Serror (2014). That empirical fit convinces us that a meanreversion process with only one time scale is enough to model, in a pretty precise way, the reality of the trend-following mechanism at the average scale of CTAs and as a consequence, using only one simple EMA, appears optimal to capture the trend. As a consequence, using a complex basket of different complex indicators as signal, do not seem to be so rational or optimal and exposes to the risk of cherry-picking. Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8020635","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":545761984,"identity":"827e5f3c-74d4-4405-9f90-059fb16da88b","order_by":0,"name":"Sébastien Valeyre","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA6UlEQVRIiWNgGAWjYDACCRBRACKYD4C4MkRqMQARbAkgLg8pWnggJEEd8rMb2CR+GNgkbm/v+fzqRo0FDwP74aMb8GkxuHOATbLHIC1xzpmz26xzjgEdxpOWdgOvFokEZgMeg8OJMyRytxnnsAG1SPCY4dUiPyOB2fCPwf/EGfJvnhnn/CNCC8ONBMbHPAYHgLbwMD/ObSNCi8Gdg42PZQySjWfwpJkx5/ZJ8LAR8ov87OYDB99U2MnOYD/8+HPOtzo5fvbDx/A7jIGxAUQ6Akk2cByx4VeOAPZAzPyBWNWjYBSMglEwsgAAgo9ExGlEuz4AAAAASUVORK5CYII=","orcid":"","institution":"Machina Capital","correspondingAuthor":true,"prefix":"","firstName":"Sébastien","middleName":"","lastName":"Valeyre","suffix":""}],"badges":[],"createdAt":"2025-11-03 15:08:35","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8020635/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8020635/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":96046834,"identity":"4dfe5010-4d4d-445e-9fc8-eaae0533818d","added_by":"auto","created_at":"2025-11-17 05:57:11","extension":"pdf","order_by":0,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":685934,"visible":true,"origin":"","legend":"","description":"","filename":"BreakingTrendAnonymousFinancialMarketsandPortfolioManagementV2.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8020635/v1/4928e09946c0661e980e1120.pdf"},{"id":96046833,"identity":"693b6cb1-fcc1-4a05-bbad-fc6a059c69aa","added_by":"auto","created_at":"2025-11-17 05:57:11","extension":"json","order_by":1,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":2385,"visible":true,"origin":"","legend":"","description":"","filename":"9882129bc95b4067bcc9efa81df7ffda.json","url":"https://assets-eu.researchsquare.com/files/rs-8020635/v1/15655af99ce784defbc9de3f.json"},{"id":96602868,"identity":"406c836b-be36-436b-9a4f-1d2f1f18bbb0","added_by":"auto","created_at":"2025-11-24 09:03:49","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":590373,"visible":true,"origin":"","legend":"","description":"","filename":"BreakingTrendAnonymousFinancialMarketsandPortfolioManagementV2.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8020635/v1_covered_cff2497c-2f8d-4dee-b87f-44303489f316.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Breaking the Trend: How to Avoid Cherry-Picked Signals","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"","lastPublishedDoi":"10.21203/rs.3.rs-8020635/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8020635/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"Our empirical results show an impressive fit with the pretty complex theoretical Sharpe formula of a Trend following strategy depending on the parameter of the signal, which was derived by Grebenkov and Serror (2014). 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